Analysts predict drilling contractors to recover

Improved market conditions expected to result in 40% earnings jump

Ray Tyson

Petroleum News Houston Correspondent

The major U.S.-based contract drillers can look forward to a pick up in rig activity during the 2004 second quarter following what is expected to be a relatively weak earnings performance in this year’s first quarter.

First-quarter earnings among the leading drilling contractors could tumble roughly 25 percent on average from the previous quarter, according to a Petroleum News survey based on Thompson-First Call analysts’ estimates. (See related story on page 1.)

However, because of improving market conditions worldwide, earnings per share are expected to jump more than 40 percent on average during the current second quarter ending June 30, the survey indicates. And 2004 first-quarter profits could be up substantially versus the same period last year.

A consensus estimate represents the average earnings of all analysts polled on a particular company. Individual estimates can be higher or lower than the consensus and tend to change as reporting season approaches. Earning estimates generally exclude special items and other charges taken by a company during a quarter.

For the major offshore drillers, the consensus among analysts is that Rowan and Diamond Offshore actually will be reporting losses for the recent quarter, as well as land contractors Parker Drilling and Grey Wolf.

Diamond Offshore could report 6 cent per share loss

Rowan could report a loss of 5 cents per share in this year’s first quarter, compared to a gain of 5 cents per share in the prior quarter and a loss of 18 cents per share a year ago. Rowan could register a profit of around 5 cents per share in the current quarter, according to consensus estimates.

Grey Wolf is expected to lose 2 cents per share for the 2004 first quarter, while breaking even in the previous quarter and losing 5 cents per share for the same period a year earlier. The company is expected to break even in the 2004 second quarter.

Despite a resurgence in land drilling, particularly in the United States, Parker Drilling just can’t seem to get on track. Parker is expected to post a loss of around 8 cents per share in the 2004 first quarter, preceded by a loss of 9 cents per share in the 2003 fourth quarter and a loss of 11 cents per share in last year’s first quarter. Moreover, the company could lose 6 cents per share during the current quarter, according to consensus estimates.

Transocean expected to have earnings of 3 cents per share

GlobalSantaFe, another large offshore driller, is expected to register net income of around 2 cents per share in the 2004 first quarter, according to consensus estimates. That compares to 10 cents per share each in the previous quarter and last year’s first quarter. The company could see net income of about 8 cents per share in this year’s second quarter.

Ensco International is expected to post net income of 14 cents per share in the 2004 first quarter, compared to 18 cents per share in the 2003 fourth quarter and 17 cents per share in the 2003 first quarter. The consensus has Ensco earning about 15 cents per share in the 2004 second quarter.

Nabors Industries is expected to earn about 47 cents per share in the 2004 first quarter, versus 42 cents per share in the previous quarter and 31 cents per share in the year-ago period. It’s estimated the company will earn about 36 cents per share in the 2004 second quarter.

Noble Drilling should report 2004 first-quarter net income of about 20 cents per share, compared to 23 cents per share in the previous quarter and 30 cents per share in last year’s first quarter. The company can expect to turn a profit of about 29 cents per share in this year’s second quarter.

Patterson-UTI expected to earn 27 cents

Earnings among the leading oilfield service companies are expected to closely track those of the contract drillers, although none of the service companies is expected to report a net income loss for the 2004 first quarter.

Halliburton, plagued by controversy over its Iraqi fuel and military food contracts, is expected to post a first-quarter profit of 31 cents per share, compared to 34 cents per share in the prior quarter and 12 cents per share in last year’s first quarter. The company should turn a profit of around 34 cents per share in this year’s second quarter, according to consensus estimates.

Schlumberger’s 2004 first-quarter profit should come in around 47 cents per share, versus 50 cents per share in the previous quarter and 26 cents per share in the year-ago quarter. For the 2004 second quarter, the company is expected to earn about 50 cents per share.

Baker Hughes is expected to register net income of about 25 cents per share in the 2004 first quarter, compared to 32 cents per share in the previous quarter and 14 cents per share for the same period last year. For the 2004 second quarter, Baker Hughes should earn around 30 cents per share.

Pride International, faced with its own contract problems, is expected to improve slightly sequentially with 2004 first-quarter earnings of about 4 cents per share, compared to 3 cents per share in the previous quarter and 3 cents per share in the year-ago period. Pride’s 2004 second-quarter net income is expected to come in around 6 cents per share, according to consensus estimates.